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Hello and welcome back to Energy Source, coming to you from New York.

Energy and climate ministers from the G7 group of industrialised nations have agreed to phase out coal power by 2035 in situations where the emissions have not been captured. The deal, which was hammered out at this week’s meeting in Turin, Italy, puts a timeline on an agreement struck at last year’s UN climate summit in Dubai to accelerate efforts towards the phasing down of so-called unabated coal power.

“We do have an agreement to phase out coal in the first half of the 2030s,” said Andrew Bowie, the UK minister for nuclear and renewables, who described the G7 deal as “historic”.

My FT colleagues Kenza Bryan and Attracta Mooney in London have the story on the deal, which is expected to be formally announced today.

Our main item focuses on the role that private capital will play in the energy transition. We also detail a report alleging that private equity group KKR is continuing to invest in fossil fuels despite its pledges on clean energy.

Thanks for reading,


Private equity in the energy transition: what industry insiders say

When private equity giant KKR appointed Shell’s former chief executive Ben van Beurden as an adviser on its global climate strategy this month, it highlighted private capital’s growing role in the energy transition.

“There are quite a few things you could do in that space that are easier and more logical to do with private capital than it is with public capital,” van Beurden told the Financial Times.

“The more I get exposed to private equity, the more that I believe that this is a really crucial part of the overall societal puzzle to get right.”

KKR, Apollo and Brookfield are among the big private equity groups that are raising energy transition funds as they chase a fast-growing market sucking up vast amounts of capital. A new generation of venture capital groups, such as Ara Partners and Energy Impact Partners, has also emerged, placing sustainable investment goals and decarbonisation at the centre of their strategy.

To investigate the impact that these funds are having on the sector, Energy Source spoke to several private equity executives under Chatham House rules (this means we cannot quote them directly). We also spoke to financial advisers, lawyers and NGOs focused on the energy transition about several trends, which we’ve summed up below. 

Private equity will be a critical funder of the green transition

Almost everyone agrees the energy transition cannot succeed without private capital because of the scale of the financing challenge. The world invested about $1.8tn in clean energy in 2023 — a record amount — but this needs to climb to about $4.5tn a year by the early 2030s to meet the Paris Agreement’s 2050 net zero target, says the International Energy Agency. Governments and public companies cannot do it alone.

Private capital is playing a growing role in the transition. Last year private equity and venture capital transactions in the global renewable electricity sector reached $7.2bn, the highest total in five years, according to S&P Global Market Intelligence.

Column chart of Total transaction value ($bn) showing Private equity deals in renewable power reached a record high in 2023

Private capital is well suited to back complex energy projects

Private equity teams are experts at spotting and executing investments in complex environments such as energy, said Mike Collier, partner at Texas-based financial advisory firm Weaver. They have a higher risk appetite than public companies and other investors, which may be slower to embrace new technologies and trends. Private equity funds have raised record amounts of capital to deploy. As of April 2024 they had amassed a record $2.63tn in “dry powder” — unspent cash reserves, according to S&P Global Market Intelligence — up from $2.3tn in December.

Energy transition investments carry novel risks

Akin, a global law firm headquartered in Washington, DC, says energy transition investments can be risky due to continuing uncertainty over the trajectory and timescales of the process. Companies must consider first-of-a-kind technology risks, heavy dependence on government policy and regulation and reputation risks linked to allegations of “greenwashing”, which could hamper returns and timely exits, it says.

To cope with these challenges, private equity funds have adopted longer time horizons for some funds and launched multi-fund strategies that enable businesses to stay out of public markets for longer, according to Peter Gardett, executive director of research at S&P Global Commodity Insights and co-author of a report on private equity and the energy transition.

This reduces the risk for businesses backed by private capital, which are not subject to the same volatility and onerous disclosure regimes as publicly listed rivals.

The sector faces political and ESG challenges  

Pension funds, insurance companies and other investors in private equity groups are pressing them to invest in the energy transition amid heightened environmental, social and governance concerns. Government incentives schemes, in particular, the Biden administration’s Inflation Reduction Act, are also drawing private equity funds to the sector.

Funds are concerned the IRA could unravel following the US election in November, which could jeopardise returns from some low-carbon investments. They also face tricky decisions over investments in natural gas, a fossil fuel that many view as a vital component of the transition to renewables. But some European investors and green campaigners argue that gas should be avoided. Meanwhile, in Texas, private equity groups face political attacks from Republicans if they do not invest in fossil fuels.  

Private equity funds will continue to invest if it makes money

Collier said private equity’s continued funding of the transition will depend on financial returns generated by its first wave of investments, which have exploded over the past five years. Using data from PitchBook, he estimates there were less than $500mn private equity-backed energy transition deals in the US in 2018. By 2023 the figure had jumped to more than $25.9bn.  

Two-thirds of these investments were credit transactions, rather than equity investments in projects, he said. This suggests the industry is not yet sure about the type of returns that they will generate from energy transition investments.  

“The safer bet is to lend money and that allows you to be in the market, building relationships and getting to know how things work and ultimately picking your spots,” said Collier.

KKR contradicting clean energy pledge, report alleges

The decision by private equity groups to launch dedicated climate funds does not mean the industry has withdrawn from fossil fuels. For example, it remains a big financial supporter of the liquefied natural gas industry, even as some European banks reduce their exposure to the sector over ESG concerns.

A report by the Private Equity Climate Risks project — provided exclusively to Energy Source — alleges KKR has contradicted a pledge in its most recent sustainability report to “support a sustainable transition to a clean energy future” by continuing to invest heavily in coal, gas and oil.

“Between March 2022 and the end of 2023, KKR invested in five portfolio companies that own 78 fossil fuels assets, or nearly half of its current active fossil fuels holdings by number,” says the PECR report. This includes investments in Canada’s Pembina Gas Infrastructure and ContourGlobal Plc, which has a thermal power plant division that utilises coal, gas and oil to generate electricity, it says.      

Aditi Sen, managing director of research and campaigns at Americans for Financial Reform Education Fund, who provided editorial support for the PECR report, said KKR’s investment in LNG helped fuel a rapid expansion in the US with negative climate impacts.

The private equity model continues to extract resources from fossil fuel assets that should instead be cleaned up, remediated and transitioned, she said.

“Like coal-powered plants — there are examples of debt-driven dividend recaps, saddling portfolio companies with interest payments, charging exorbitant management fees; none of that is going to the type of capital-intensive activity that an actual transition would require,” said Sen.

The PECR report claims fossil fuel assets backed by KKR discharged an estimated 93mn metric tons of carbon dioxide equivalent in 2023, which is higher than the energy-related emissions generated by 34 out of 50 US states.

The report says KKR excludes the emissions of its portfolio companies in its own sustainability report, which discloses some 14,342 tonnes of CO₂ emissions from its own operations.  

Asked to comment on the details of the PECR report’s claims, KKR alleged the Private Equity Stakeholder Project regularly presented misleading data and arguments to support its agenda of attacking the private markets industry. The private equity fund did not provide any alternative figures when requested by the FT.

The private equity group said: “A just energy transition will require massive investment in green energy and decarbonising high emitters. KKR is contributing to both, having deployed nearly $40bn investing in renewables, energy efficiency and green energy distribution, and working with companies with high emissions — including those named in the report — to develop net zero-aligned decarbonisation plans.”

Power Points

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.

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